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Amatheon Agri Limited v Uganda Revenue Authority (TAT Application No 50 of 2018)

Tribunal · [2020] UGTAT 17 · 2020 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging VAT assessment following rejection of VAT refund claim
Decision
Assessment set aside but applicant not entitled to zero-rating or input VAT credit

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tribunal held that the supply of cereals by a farmer who grows but does not mill the cereals is an exempt supply under the Second Schedule of the VAT Act, not a zero-rated supply. Paragraph 1(l) of the Third Schedule requires that cereals be both grown and milled in Uganda by the same supplier to qualify for zero-rating. The legislative intent, discerned from Parliamentary Hansard, was to encourage value addition through milling. The applicant's activities of drying, cleaning and packaging constituted low value-added processing falling within the definition of unprocessed agricultural products under the Second Schedule.

Outcome

Assessment set aside but applicant not entitled to zero-rating or input VAT credit

Facts

Amatheon Agri Uganda Limited is a company engaged in commercial production of cereals, mainly rice and maize, in Nwoya. The applicant harvests, dries, cleans, packages and sells the cereals to local millers in Uganda. Since its VAT registration, the applicant charged VAT at 0% on sales to millers and claimed input VAT credit. On 14 August 2017, the applicant applied for a VAT refund of Shs. 30,012,946 for July 2017. On 21 June 2018, following an audit, URA rejected the refund application and disallowed all input tax credit claimed, on the ground that the applicant had misclassified its supplies as zero-rated instead of exempt. URA raised assessments of Shs. 154,144,995. The applicant objected but URA maintained its position in its objection decision of 22 June 2018.

Issues

  1. Whether the applicant's supply of cereals is a zero-rated supply or an exempt supply for value added tax purposes.
  2. What remedies are available to the parties.

Orders

  • The applicant's supply of cereals was exempt and not zero-rated.
  • The applicant is not entitled to input VAT credit.
  • The assessment of Shs. 154,144,995 is set aside.
  • Each party to bear its own costs.

Rules and key headnotes

Value Added Tax — Zero-Rating — Cereals Grown and Milled in Uganda — Interpretation of Third Schedule para.1(l)
For a supply of cereals to qualify as zero-rated under paragraph 1(l) of the Third Schedule to the VAT Act, the cereals must be both grown and milled in Uganda by the same supplier. The words 'grown and milled' are to be read conjunctively, requiring both activities to be performed by the taxpayer claiming zero-rating.
Purposive Interpretation — Use of Parliamentary Hansard — Ambiguous Tax Provisions
Where the literal meaning of a tax statute yields more than one interpretation, the court may adopt the purposive approach and refer to Parliamentary Hansard to determine the legislative intention. Reference to Parliamentary material is permitted where the legislation is ambiguous and the material clearly discloses the mischief aimed at or the legislative intention.
Value Added Tax — Legislative Intent — Zero-Rating of Cereals — Value Addition
The legislative intent behind paragraph 1(l) of the Third Schedule to the VAT Act, as discerned from Parliamentary Hansard, was to facilitate value addition by encouraging cereal farmers to not only grow but also mill their own cereals. The provision was enacted to support farmers to process cereals rather than selling unprocessed grain.
Value Added Tax — Exempt Supplies — Unprocessed Agricultural Products — Low Value-Added Activity
The supply of cereals that have been harvested, dried, cleaned and packaged but not milled constitutes an exempt supply of unprocessed agricultural products under paragraph 1(a) of the Second Schedule to the VAT Act. Activities such as drying, cleaning and packaging are low value-added activities within the meaning of paragraph 3 of the Second Schedule where the value added does not exceed 5% of the total value of the supply.
Reading Statute as a Whole — Harmonious Construction — VAT Act Schedules
The Second and Third Schedules to the VAT Act do not conflict or contradict each other. Section 24 and the Third Schedule deal with processed or milled cereals which attract a zero rate of VAT, while section 19 and the Second Schedule are concerned with unprocessed foodstuffs which are exempt from VAT. The true meaning of a provision must be consonant with the words used, having regard to their context in the Act as a whole.

Legislation cited (12)

Cases cited (8)

  • Uganda Revenue Authority v Siraje Hassan Kajura (Supreme Court Civil Appeal No. 09 of 2015)
  • Uganda Revenue Authority v Total Uganda Ltd (High Court Civil Appeal No. 08 of 2010)
  • Stanbic Bank (U) Ltd & 7 others v Uganda Revenue Authority (High Court Civil Suit No. 792 of 2006 and 170 of 2007)
  • Total (U) Ltd v Uganda Revenue Authority (Court of Appeal No. 6 of 2001)
  • St. Aubyn v Attorney General [1951] 2 ALL ER 473 at 485
  • Crane Bank v Uganda Revenue Authority (High Court Civil Appeal No. 18 of 2010)
  • Pepper (Her Majesty's Inspector of Taxes) v Hart [1992] UKHL 3
  • Commissioner of Inland Revenue v Alcan New Zealand Limited {1994} 3NZLR 139

Full judgment

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Amatheon Agri Limited v Uganda Revenue Authority (TAT Application No 50 of 2018) 2020 UGTAT 17 (28 January 2020)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.